Money and Credit
MONEY AND CREDIT
Double coincidence of wants is an essential feature
When both parties have to agree to sell and buy each others commodities. This is known as double coincidence of wants. What a person desires to sell is exactly what the other wishes to buy.
A barter system has deficiencies.
1. Barter exchanges become extremely difficult in a large economy because of the high costs people would have to incur looking for suitable persons to exchange their surpluses 2. It is difficult to carry forward one’s wealth under the barter system.
Importance of money/Money as medium of exchange.
Money acts as an intermediate in the exchange process, it is called a medium of exchange.
1. It is also acceptable to anyone at any point of time. Thus money can act as a store of value for individuals
2. It is universally acceptable and hence can be exchanged for other commodities very easily.
3. Money in a savings account in some bank you can earn interest on that money.
4. Wealth can be stored in the form of money for future use.
5. Money also acts as a convenient unit of account. The value of all goods and services can be expressed in monetary units, where a unit of money is rupee.
Rupee accepted as medium of exchange-/Role of RBI in issuing currency.
Modern forms of money include currency — paper notes and coins.
Rupee is accepted as a medium of exchange because the currency is authorized by the government of the country. In India, the Reserve Bank of India Issues currency notes on behalf of the central government. As per Indian law, no other individual or organization is allowed to issue currency. The law legalizes the use of rupee as a medium of payment that cannot be refused in settling transactions in India. No individual in India can legally refuse a payment made in rupees. Hence, the rupee is widely accepted as a medium of exchange.
Imp of demand deposits- Why are demand deposits considered as
Double coincidence of wants is an essential feature
When both parties have to agree to sell and buy each others commodities. This is known as double coincidence of wants. What a person desires to sell is exactly what the other wishes to buy.
A barter system has deficiencies.
1. Barter exchanges become extremely difficult in a large economy because of the high costs people would have to incur looking for suitable persons to exchange their surpluses 2. It is difficult to carry forward one’s wealth under the barter system.
Importance of money/Money as medium of exchange.
Money acts as an intermediate in the exchange process, it is called a medium of exchange.
1. It is also acceptable to anyone at any point of time. Thus money can act as a store of value for individuals
2. It is universally acceptable and hence can be exchanged for other commodities very easily.
3. Money in a savings account in some bank you can earn interest on that money.
4. Wealth can be stored in the form of money for future use.
5. Money also acts as a convenient unit of account. The value of all goods and services can be expressed in monetary units, where a unit of money is rupee.
Rupee accepted as medium of exchange-/Role of RBI in issuing currency.
Modern forms of money include currency — paper notes and coins.
Rupee is accepted as a medium of exchange because the currency is authorized by the government of the country. In India, the Reserve Bank of India Issues currency notes on behalf of the central government. As per Indian law, no other individual or organization is allowed to issue currency. The law legalizes the use of rupee as a medium of payment that cannot be refused in settling transactions in India. No individual in India can legally refuse a payment made in rupees. Hence, the rupee is widely accepted as a medium of exchange.
Imp of demand deposits- Why are demand deposits considered as